Services and Capabilities

Marginal Cost Working GroupAn invaluable forum for keeping up-to-date with innovations in regulatorydevelopment and sharing insight into pricing strategies for the electricity andnatural gas sectors

Utility Companies Interested in MCWG Membership are Welcome to Attend a Free Conference

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M A R G I N A L C O S T W O R K I N G G R O U P

MCWG: Past and Present

NERA’s Marginal Cost Working Group (MCWG) was founded in 1982 at the request of

utilities sector-based professionals seeking a forum to discuss the critical issues and unique

challenges facing their sector. In this forum, they would meet with industry colleagues to

discuss their experiences with regulatory successes and setbacks, test new ideas, and stay

connected to major industry trends across North America and around the globe.

The group’s original objective was to advance marginal cost estimation techniques and

pricing applications, but the focus of the meetings gradually expanded over time to include

planning for renewable resources, strategies for smart metering infrastructure, alternative

regulatory methods for distribution, transmission cost allocation, and design of pilots for

innovative rate design and implementation - such as critical peak pricing and peak time

rebates.

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N E R A E C O N O M I C C O N S U L T I N G

MCWG Conferences

Led by Kurt Strunk, Director (NYC) and specialist in Energy, MCWG

conferences are based in North America and occur biannually during the

spring and fall seasons. Innovations in regulatory development are

covered in a wide variety of topics presented by participating members

and NERA's panel of experts.

Conference materials (including presentation copies and discussion minutes)

are distributed to participating companies after the meetings adjourn.

Unattending member companies receive materials too, but the experiences

gained by real-time participation and networking with industry peers are

invaluable.

Throughout the past thirty years, hundreds of

professionals representing dozens of utility

companies have participated in MCWG Conferences.

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M A R G I N A L C O S T W O R K I N G G R O U P

Member Testimonials and Comments

“Since becoming a member of MCWG, I have expanded my network with

utilities that are involved with similar issues. It has been a great learning

experience because the focus of our semi-annual meetings are the things

that occur at each company. In the short time I have been a member, my

company has addressed no less than six issues that were discussed at one of

our conference meetings. The group has overcome the barrier of sharing with

other utilities by focusing on processes instead of specific details. The learning

comes from those who are regulated as well as those with open access. I

highly recommend attending MCWG meetings.”

Jon Kubler, Georgia Power

The Marginal Cost Working Group has been an invaluable asset to my work

at Salt River Project. Being able to network with folks who are facing similar

and at times different issues broadens the knowledge and idea base that we

can use for pricing and cost analysis. It also allows me to see methods and

solutions that perhaps I would not have thought of on my own. The papers

and issues are interesting and informative. The people who attend are open,

smart, and working on many problems that we all address. Overall, it has

been a fabulous experience.”

Ronn Rodgers, Salt River Project

“Over the many years of our involvement with the Marginal Cost Working

Group, we have found the group to be invaluable as a forum for receiving

knowledgeable feedback during the review and development of our cost of

service methodologies, and in the design of our rate structures. It has helped

us stay current with the dynamic changes that have been occurring in the

electric industry, and to appropriately reflect these changes in our regulatory

applications. The informal nature of the group is ideal for facilitating the free

and timely flow of ideas and methods used to address issues of common

interest among its members.”

Leland Jernberg, Fortis Alberta

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N E R A E C O N O M I C C O N S U L T I N G

“PGE has been a member of the Marginal Cost Working Group since the early

1990s. We’ve always found the meetings to be informative and educational.

Even when we haven’t been able to attend a meeting, we've received a binder

of presentation materials for our review. Periodically, we refer back to these

materials to help us with various aspects of marginal costing. For example,

during a recent tariff revision process, we revisited some of the papers on

standby/partial requirements service.

“In 1997, there was a generic marginal cost proceeding in Oregon, and we

had recently developed the Facilities Charge/Typical Feeder approach to

distribution marginal cost determination. Because of our well-developed

approach that could not have occurred without the help of the Marginal

Cost Working Group, we were able to get the commission to issue an order

approving our methodology over those presented by intervenors in the case.

“The contacts made at the meetings are very beneficial. It’s helpful to know

that you can reach out to someone at a utility because you heard about a

filing they made and need further information, or want to verify information

from a paper they’ve presented. Members often email each other to inquire

about similar experiences in their respective states. It's always easier to follow

in someone else’s tracks instead of having to reinvent things.

“The meetings are always in interesting places and provide the opportunity

to discuss issues over a good dinner with great people and see new sights.

In summary, the group is a great value for the money. I’ve been to lots of

conferences and find the Marginal Cost Working Group consistently provides

high-level discussions, great company, and great contacts.”

Sarah Cardwell, Portland General Electric

Member Testimonials and Comments

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M A R G I N A L C O S T W O R K I N G G R O U P

Membership

MCWG membership is open to electric and natural-gas utilities from North America and abroad. Annual dues are

$5,000 for biannual meeting participation (spring and fall) and $2,500 for single-season meeting participation

(member's choice of spring or fall). In the interest of encouraging candid discussions about regulatory issues,

regulatory agencies are not invited to join at this time.

Membership Benefits Include:

• Attending one or two conferences per year

(depending on membership type), for up to three

individuals per company

• Copies of conference presentations

• Detailed minutes of conference presentations

and discussions

• Access to past conference presentations, as requested

• Network of counterparts at other companies

• Information on current energy regulatory topics across

North America and around the world

• Sounding board for new approaches being considered

Past MCWG Topics Include:

• Solar power customers and net metering issues

• Rates for service to distributed generation

customers

• Demand response and innovative rate designs

• Smart grid pilots and cost-benefit analysis

• Electric vehicle rates and time of use rate

pilot evaluations

• Feed-in tariffs for renewable resources

• Demand side management and energy

efficiency programs

• Interruptible rate portfolio evaluation

• Innovations in marginal cost estimation

• Natural gas marginal costing, pricing,

and unbundling

• Line extension policies and connection charges

• New forms of regulation, including decoupling

• Performance-based regulation of

electricity distribution

• Economic development rates and special contracts

• Implementation of retail competition

• Selection of pricing periods for time of use rates

• Rate design for delivery service

• The value of reliability to consumers

• Reconciliation of marginal cost revenues to the total

revenue requirement

• Marginal losses

• Costing/pricing new services

• Reactive power pricing

• Rate unbundling

• Green power options and other premium services

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N E R A E C O N O M I C C O N S U L T I N G

MCWG's Participating CompaniesPast to Present Ameren CILCO

ATCO Electric

Baltimore Gas & Electric Company

BC Hydro

Bonneville Power Administration

Carolina Power & Light Company

Central Maine Power Company

Central Vermont Public Service Corp.

Commonwealth Edison Company

Conectiv

Dayton Power & Light Company

Delmarva Power & Light Company

El Paso Electric Comany

Entergy Services, Inc.

Eugene Water & Electric Board (EWEB)

Exelon Corporation

Florida Power & Light Company

FortisAlberta

Fortis BC

Georgia Power Company

Gulf Power Company

Iberdrola USA

Idaho Power Comany

Illinois Power Company

Indianapolis Power & Light Company

Interstate Power Company

Jamaica Public Service Company

Kansas City Power & Light Company

Los Angeles Department of Water & Power

Lower Colorado River Authority

Mississippi Power Company

Missouri Public Service Company

New Brunswick Power

Newfoundland Power

New York State Electric & Gas Northern

Indiana Public Service Company

NV Energy

Oklahoma Gas & Electric Company

Orange & Rockland Electric Company

Otter Tail Power Company

Pacific Gas & Electric Company

PacifiCorp

Portland General Electric Company

Public Service Company of New Mexico

Public Service Electric & Gas Company

Rochester Gas & Electric Corporation

Sacramento Municipal Utility District

Salt River Project

San Diego Gas & Electric

Seattle City Light

Southern California Edison

Southern Company

TransAlta Utilities Corporation

TU Electric

TXU Electric

Wisconsin Electric Power Company

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M A R G I N A L C O S T W O R K I N G G R O U P

Leadership

Kurt Strunk, Director (NYC) and specialist in

Energy, is an expert in energy sector matters

with over 20 years of experience in complex

commercial litigation, arbitration and regulatory

proceedings. In the oil and gas sectors, he

has consulted on rate matters, mergers

and acquisitions, restructurings, contract

disputes, and product pricing. He has advised

governments, regulators, and energy companies on industry structure,

regulation, and sector reform, and worked extensively on matters relating

to all aspects of the electric power sector in the US and across the

globe, including the design of electricity markets to encourage efficient

transmission investment, and capacity market design.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts

dedicated to applying economic, finance, and quantitative principles to

complex business and legal challenges. For over half a century, NERA’s

economists have been creating strategies, studies, reports, expert testimony,

and policy recommendations for government authorities and the world’s

leading law firms and corporations. With its main office in New York City,

NERA serves clients from more than 20 offices across North America,

Europe, and Asia Pacific.

Contact

For more information about MCWG and to request an invitation to the

next meeting, please contact:

Kurt Strunk

Director

1166 Avenue of the Americas, 29th Floor

New York, NY 10036

+1 212 345 3000 | kurt.strunk@nera.com

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National Economic

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